Rising water threats likely to hit business profits by 2020

Water risks are set to intensify as new research reveals that 60% of major US corporations believe this issue will affect business growth and profitability within the next five years.

More than 80% of the survey's respondents said water challenges would affect their decision on where to locate future facilities

This is a stark increase from only five years ago, when water issues affected business growth and profitability for less than 20% of responding companies, according to the latest survey from the Pacific Institute and VOX Global.

This belief that water challenges will significantly worsen is now starting to have an impact on operational strategies - more than 80% of respondents said it would affect their decision on where to locate future facilities.

That said, the majority of companies surveyed do not appear to be planning corollary increases in the breadth and scale of their water risk management practices. In fact, nearly 70% felt their current level of investment in water management to be sufficient.

The US study surveyed more than 50 companies including senior officials with direct responsibility for water issues from companies including AT&T, The Hershey Company, MillerCoors and Union Pacific Railroad.

According to Tony Calandro, senior partner and leader of the VOX Corporate Sustainability and Social Responsibility Practice Group, as more corporate boards discuss the impact of social and environmental issues on their growth, water risk will emerge as central to company strategy.

"This new economic reality necessitates that companies better understand the many ways that water affects their reputation and bottom line, and the multitude of communication and management strategies they may need to adequately address these business challenges," he said.

Calandro noted that internal obstacles are often to blame for slow action. "Business leaders we surveyed pointed to two significant internal obstacles that hinder company-wide buy-in to water: lack of time to raise awareness and buy-in and other risks ranking as a higher, more immediate priority."

Return on investment

The research found that companies use a variety of ways to build internal support to fully understand what impact water has throughout the business. For instance, Hershey's senior director for CSR Todd Camp highlighted the importance of detailed reporting and knowledge transfer.

"Since we were not necessarily seeing water stress or scarcity issues within our primary manufacturing footprint, we didn't have the focus that was expected of the food processing industry sector," he said.

"Participation in the reporting initiatives and an evaluation of our peer group's efforts provided the incentive to be proactive."

Meanwhile some companies have found that relatively small investments can produce a significant return on investment in mitigating water risks.

AT&T's assistant vice president for sustainability operations, John Schulz, said: "We're beginning to see that relatively small capital investments can bring about nearly ten times the amount of savings in annual water and energy costs."